London, July 31, 2026 – Oil markets closed out a turbulent July with Brent crude posting a gain of more than 20% for the month, while the spread between international and U.S. benchmarks widened dramatically amid ongoing concerns about maritime security in the Strait of Hormuz.
As of 0952 GMT on Friday, Brent crude was trading at $89.50 per barrel, while West Texas Intermediate (WTI) stood at $83.63. The premium of Brent over WTI had expanded to approximately $5.87, a jump of roughly 60% from the $3.67 spread seen at the beginning of July, according to preliminary estimates based on rounded monthly returns.
The widening gap underscores the growing importance of safe shipping routes for global crude supplies. Brent serves as the primary benchmark for seaborne crude, while WTI is the U.S. domestic benchmark. For refiners reliant on imported barrels, the differential is a key cost factor.
Shipping Traffic Remains Depressed
Market activity on Friday was relatively steady, with traders closely monitoring vessel movements through the Strait of Hormuz. Two very large crude carriers (VLCCs), each carrying approximately two million barrels, transited the strait on Friday. Four commodity ships exited the waterway, compared with three the previous day.
According to the Commonwealth Bank of Australia (ASX: CBA), current traffic through Hormuz is running at just 30% to 35% of levels seen before the conflict. While this improvement may help cap further price increases, it remains far below normal capacity.
“The market has stopped trading the war and started trading the shipping data,” noted Ole Hvalbye, an analyst at Skandinaviska Enskilda Banken (STO: SEB-A).
Diversion to Egypt and Suez Route Pressures
Tankers have increasingly diverted crude to Egypt, with SUMED pipeline loadings surging to 28.79 million barrels in July, up from 19.52 million in April. The share of Yanbu loadings heading south fell to 43%, compared with 81% in June. The Sidi Kerir weekly lift rate stood at 1.4 million barrels per day, or 56% of its 2.5 million-barrel capacity.
The Suez route is operationally slower and less efficient. For shipments to Northeast Asia, transit times can more than double, with arrivals potentially delayed by around a month. Fully loaded VLCCs are forced to transfer part of their cargo to the SUMED pipeline.
During the first half of 2025, approximately 20.9 million barrels per day moved through Hormuz, accounting for nearly 20% of worldwide petroleum-liquids consumption. The Suez and SUMED systems cannot handle volumes of this magnitude. Analysts warn that as much as five million barrels per day in alternate supply routes could be at risk if an attack occurred near the canal.
“Disruption to the Suez Canal would have an almost immediate impact on prices,” said Matthew Wright, an analyst at Kpler.
Risk Repricing and Market Reaction
Risk was repriced rapidly on Wednesday following President Donald Trump's pledge of additional strikes on Iran. Brent surged 7.91% to close at $90.74, while WTI advanced 6.56% to $84.46. U.S. equities declined, with the Dow Jones Industrial Average dropping 1,153 points (-2.1%), the S&P 500 falling 1.5%, and the Nasdaq Composite losing 1.7%.
Physical inventories are also tightening. U.S. crude stocks fell by 7.2 million barrels to 404.5 million, the lowest level since 2018, versus analyst expectations of a 1.3 million-barrel decline.
Consumers are feeling the pinch. The average U.S. gasoline price reached $4.09 per gallon, up 37% since the conflict began. China plans to raise gasoline and diesel price ceilings by 14% and 15%, respectively, compared with the last adjustment before the war.
Outlook and Risks
On the downside, demand destruction and a later supply rebound could offset gains. The U.S. Energy Information Administration (EIA) projects daily consumption will decrease by 1.2 million barrels in 2026. Inventories are expected to decline by 2.2 million barrels per day in the third quarter, then recover in the fourth.
Brent currently trades at $89.50, roughly 21% above the EIA's $74 forecast for the third quarter, reflecting a significant disruption premium that could narrow rapidly if shipping returns to normal.
Risks are balanced. Continued flow through Hormuz or a truce could significantly narrow the spread, while a strike near Suez could push Brent back to $100. The spread projection remains tentative as monthly increases were approximated.
Short-term traders are focused on Oman-Iran negotiations and daily ship movements. The next U.S. petroleum stockpiles report is scheduled for August 5.
